Seller of imported goods faces probe for GST profiteering

The National Anti-profiteering Authority has held a supplier of imported machinery guilty of profiteering for not passing on the benefit of input tax credit.

ET Bureau

December 03, 2018, 07:07 IST

New Delhi: In a crucial ruling for traders who import and sell in India, the National Anti-profiteering Authority has held a supplier of imported machinery guilty of profiteering for not passing on the benefit of input tax credit due to GST, and also ordered a wider probe into other products sold by the entity.

The authority directed the Director General of Anti-Profiteering to conduct a fresh investigation covering all products supplied by the entity in question — Theco India Pvt Ltd — to unearth and quantify the benefit that it had failed to pass on to customers. It also said that a fresh notice be given asking the importer to explain why penalty should not be imposed, and directed the company to reduce the sale price immediately commensurate to the benefit.

“This is the first anti-profiteering ruling covering this aspect. It clearly lays down the guidelines, and if found guilty, leads to further investigation on other products being imported and sold," said Anita Rastogi, indirect tax partner, PwC. Rastogi said the ruling also indicates that any increase in price, if agreed by both parties, should be fully documented or else will not be accepted by the authorities.

INPUT CREDIT AVAILABILITY Crown Express Dental Lab, the applicant, submitted that a number of taxes such as the Central Sales Tax, Countervailing Duty (CVD) and Special Additional Duty (SAD) had been subsumed in the IGST, yet it had been charged 18% IGST. The authority held that the seller should have reduced the base price to the extent of CVD which was chargeable on the amount mentioned in the quotation.

This is because in the period prior to GST, no CENVAT credit was available for the CVD paid on the import of the goods whereas in the post GST period, no CVD was charged, instead IGST was levied on the import of goods which was available as Input Tax Credit.

Hence, the price offered prior to implementation of GST has to be reduced by the amount of CVD paid in order to neutralise the impact of Input Tax Credit now available, it observed. “This is an important ruling for businesses in the import and sell model as the order clearly states that credit of IGST vis-à-vis CVD which was not available as set off, needs to be passed on as price reduction to consumers,” said Harpreet Singh, Partner in KPMG.

A recent Allahabad high court judgment may, however, provide some relief with the court ruling that there shall be no tax levied in case of purchases made at duty free stores at the arrival or departure terminals.